When or If? Deloitte Study Explores Blockchain Loyalty Programs

A new report from Deloitte explores how blockchain could be used in loyalty rewards programs.

The report, released by the Deloitte Center for Financial Services, argues that most loyalty programs offered by US companies face a problem, as they are underutilized and have high management costs. At the same time, loyalty rewards recipients are just as likely to leave a program due to a perceived lack of convenience, the study found.

Blockchain, according to Deloitte, presents a potential solution, offering a mechanism by which a loyalty program would function similarly to digital currency. For example, customers could receive reward points that can be redeemed for, say, an upgrade to a plane ticket.

The report’s authors state:

“In short, loyalty rewards are also a type of digital currency, so it is only natural that the engine that enables bitcoin to be transacted among multiple parties in exchange for services, goods, and even other monetary tender could do the same for loyalty reward points.”

It’s a concept – using the technology to build more seamless, integrated loyalty programs – that has attracted interest in the past.

Startups like Loyyal have aimed to build platforms dedicated to this use case, while other firms, like credit card firm China UnionPay, have sought to explore similar capabilities.

In its report, Deloitte argues that blockchain can help cut out certain intermediaries in the reward delivery and redemption process, reducing friction for those looking to dole out rewards as well as the customers who receive them.

“We maintain that blockchain will allow instantaneous and secure creation, redemption, and exchange of loyalty reward points across programs, vendors, and industries through a trustless environment using cryptographic proofs in lieu of trusted third parties and administrators,” the authors argue.

Some questions do remain, however, especially on the regulatory front.

The report’s authors speculate that “blockchain could take millions of dollars of unused loyalty point liabilities off of balance sheets”, but that for now, regulators might not be so comfortable giving their approval for this new state of affairs.

Ultimately, according to Deloitte, the success of blockchain in the loyalty space depends on whether enough companies actually take the plunge and adopt the technology in a meaningful way.

“So what are we waiting for?” the authors ask. “Well, for one, critical mass.”